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Fast Comment SwedenRiksbank monetary policy decision: Fully in line with our expectations

  1. No repo rate change, but first rise delayed
  2. Changes in the communication, both on the krona and on preparedness to adjust policy
  3. We expect the first rate rise in December
No repo rate change, but first hike delayed
Neither we nor anyone else expected the Riksbank to announce a change in the repo rate today. In contrast, a survey showed analysts unanimously saw a change in the Riksbank's repo rate forecast. And the Riksbank delivered exactly that, now saying that it "assesses that the rate will begin to be raised toward the end of the year."
Changes in the communication, both on the krona and on preparedness to adjust policy
We had also expected the weak krona to have implications for the press release and overall message. The Riksbank has now chosen a new wording on the relationship between the krona to inflation it wants to see. Instead of saying that it is "important that the krona does not appreciate too quickly", it now says that it is "important that the krona exchange rate develops in a way compatible with inflation stabilising close to the target." Furthermore, the Executive Board has moderated its tone by removing the dovish wording on being "prepared to implement further monetary policy easing", instead, saying it is "prepared to adjust monetary policy" in the face of changed conditions. Still, the krona weakened after today's announcement.
We expect the first rate rise in December
Ultimately, we expect the Riksbank to raise the repo rate at its December meeting. We forecast a gradual rise in underlying inflation, but, boosted by the weak krona and high energy prices, CPIF inflation will remain close to the inflation target throughout 2018.

Disclaimer

Johan Löf

Senior Economist

Sweden

jolo22@handelsbanken.se

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